Church votes to fight federal probe

Louis SahagunLos Angeles Times Staff Writer

A liberal Pasadena church on Thursday declared that it will refuse to comply with an IRS investigation into its tax-exemption status launched after a guest speaker was critical of President Bush in a sermon.

At a news conference attended by 50 cheering supporters gathered before the marble altar at All Saints Episcopal Church, the Rev. Ed Bacon said his 3,500-member congregation did not violate tax regulations barring tax-exempt organizations from endorsing or opposing candidates when a former rector, George F. Regas, criticized the Bush administration two days before the 2004 presidential election.

The Episcopal faith, the 58-year-old rector said, "calls us to speak to the issues of war and poverty, bigotry, torture, and all forms of terrorism ... always stopping short of supporting or opposing political parties or candidates for public office."

Joined by members of other faiths, he added, "We are also not here for ourselves alone but to defend the freedom of pulpits in faith communities throughout our land."

The All Saints case escalated a week ago when the IRS slapped the 80-year-old parish with a summons demanding that it turn over by Sept. 29 all materials, such as newsletters and sermons, produced during the 2004 election year with political references. Bacon was told to testify in person Oct. 11.

At stake, several religious leaders say, is freedom from government intimidation when churches address moral issues of the day from the pulpit.

In an interview, Richard Land, president of the Ethics and Religious Liberty Commission of the Southern Baptist Convention, said, "Churches should not endorse political candidates. But the IRS is seriously out of kilter and wrong-headed on this one; it's an appalling intrusion and it smacks of intimidation."

Now, as the November election approaches, some churches worry that they may be the next targets of the IRS. This summer, the agency issued a statement warning nonprofits, including churches, that it was stepping up its efforts to crack down on illegal electioneering.

The Interfaith Alliance announced Thursday that it has started distributing 20,000 pamphlets to churches, synagogues and mosques offering advice on how to comply with federal law.

The Rev. C. Welton Gaddy, president of the alliance, a national group with 185,000 members, said that he was concerned that "the recent rush of candidates and political parties -- and their often aggressive tactics -- to reach out to people of faith lures religious organizations into dangerous legal territory."

The goal, Gaddy said, is to avoid the kind of partisan politicking recently aired in a televised campaign ad for Rep. Harold E. Ford Jr. (D-Tennessee), who is running for a Senate seat. The commercial is set inside a church.

Then there was Kansas Atty. Gen. Phill Kline, a Republican who, according to a four-page strategy memo leaked to the news media, told his reelection campaign to get pastors to recruit "money people" who could help his reelection campaign.

At All Saints, the 26-member vestry voted unanimously early Thursday to "challenge the IRS in a court of law," said senior warden Bob Long. Federal law prohibits the IRS from discussing a specific case. But in an interview Thursday, Steven T. Miller, commissioner of the agency's tax-exempt and government entities division, said the law is clear: The nation's roughly 1 million nonprofits, including churches, are barred from speaking on behalf of, or against, any candidate.

The law is not new; it dates back to 1954. What is new is a concern over the level of prohibited activity that the IRS has been seeing by charities and churches in recent years. A recent IRS report reviewed 87 completed cases of alleged illegal campaigning by nonprofits in the 2004 election cycle.

Of those closed cases, 71% were found to have engaged in what the agency called "political intervention." But in only four of those cases, none of them involving churches, did the IRS revoke a group's tax-exempt status.

If an entity declines to answer a summons in a case of alleged illegal campaigning, the IRS can ask the Justice Department to pursue the case in federal court, which is exactly what All Saints wants to happen.

"That is not to say that this challenge, as well as many other steps we have already taken to respond properly and timely to the IRS investigation, does not stretch us financially -- it does," Long said. To help defray the legal costs, Bacon said All Saints, the largest Episcopal church west of the Mississippi, has created a new category of membership, "Solidarity Membership," for supporters of other faiths wishing to join the cause.

"We smell intimidation," said Maher Hathout, chairman of the Islamic Center of Southern California. "It smells rotten, and we should not allow any aspect of intimidation to be directed to any member of our great country."

Rabbi Steven Jacobs of Temple Kol Tikvah, who also attended the news conference, said, "There seems to be an assault upon the pulpit, and it seems to fit a pattern of focusing on those challenging our administration."

All Saints' public skirmish with the IRS is only the latest example of how it has been speaking out on political issues since a rector protested the internment of Japanese Americans during World War II. Bacon, a former Southern Baptist who was a conscientious objector during the Vietnam War, continues that tradition. The church has even posted documents central to the case on its website, www.allsaints-pas.org, and Bacon likes to say that social action is a requirement of religious faith.

Tax experts, however, expressed mixed opinions about the church's chances of prevailing against the IRS. A federal judge could order the church to produce the documents or face sanctions, including fines.

"It's very difficult to beat a summons in court," said Ed Robbins, an attorney specializing in tax exemption litigation. "At the end of the day, if the IRS digs in its heels and wants this data, they'll get it."

All Saint's, however, had welcome news about three weeks ago when one of its attorneys, Marcus Owens, a former head of the IRS exemption office, persuaded the IRS to drop an audit of the National Assn. for the Advancement of Colored People. That investigation was also sparked by a speech that criticized Bush and the Bush administration's war in Iraq.

Immediately after Thursday's news conference, Owens informed the IRS of the church's decision. "We believe the only way to challenge the IRS' actions in this case is through a summons enforcement proceeding in court," he told IRS officials in a letter, "and therefore the church respectfully declines to respond to the summons. Rev. Bacon will not appear to testify Oct. 11."